DeFi Giant MakerDAO Voting on Hiking DAI Stablecoin Rewards

Increasing the DAI savings rate would increase the Maker stablecoin’s competitiveness and help mitigate capital outflow from crypto to traditional financial markets, MakerDAO contributors said.

AccessTimeIconNov 28, 2022 at 9:35 p.m. UTC
Updated Jan 19, 2023 at 10:31 p.m. UTC
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Decentralized finance giant MakerDAO's community is voting on increasing the annual reward for its DAI stablecoin up to 1%.

Community members are casting their ranked-choice vote through Dec. 1 to hike the so-called DAI Savings Rate to either 1%, 0.75%, 0.5%, 0.25% or leave it unchanged from its current 0.01% rate. MakerDAO initiated the vote on Monday.

At the time of publication, all votes favored raising the rate to 1%. This may change as more voters cast their preference.

The voting is occurring as yields in decentralized finance (DeFi) have plummeted amid lower appetite for crypto lending. Meanwhile, yields in traditional markets have increased dramatically due to the Federal Reserve’s aggressive campaign to raise interest rates, which has exacerbated the capital flight from DeFi.

For example, investors of the second-largest stablecoin, USDC, may earn slightly more than 1% annually by lending their holdings. This is a significantly lower annual rate than investing in U.S. Treasury bonds, which yield around 4% and are considered the least risky investments.

MakerDAO’s revenue boon

Increasing the reward is possible as Maker boosted its revenue by putting a part of its $7.7 billion in reserves to work. The strategy consists of teaming up with institutional investors such as Coinbase and allocating in multiple yield-generating investment strategies, including investing in traditional assets like government bonds.

A part of that new-found revenue should be redistributed to DAI holders to make the stablecoin more attractive for crypto investors, prominent MakerDAO contributors Sebastien Derivaux and Sam MacPherson said earlier this month.

As Maker increasingly invests in assets outside digital assets, it may offer a way to capture the rising yields in traditional markets while simultaneously mitigating capital outflows from crypto, MacPherson argued in a tweet.

“Banks are offering 4%+ in risk-free yield. We should do the same,” he wrote in a tweet.

In a forum discussion earlier this month, Derivaux said that raising the reward would also make DAI more competitive compared to rival stablecoins.

“We could expect that such a move would incentivize USDC holders to migrate to lend DAI instead,” Derivaux wrote in his proposal. “On the other hand, this would be a significant cost for MakerDAO.”


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

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